Data from Citywire Discovery reveal the very few managers adding value in the European small and mid-cap space.

Citywire Discovery: the minority adding European small-cap value

Not many managers have been able to add value over both 10 and three-year periods in the European small and mid-cap equity sector.

In fact, just three have: Citywire A-rated Nicholas Williams at Barings, + rated Peter Fruzzetti(pictured) at MFS, and A-rated Philip Best at Argos. The trio all have positive manager information ratios over both long and medium-term timeframes.

That makes them a distinct minority in the peer group of 24 funds with track records stretching back to 2004. Nine have generated negative risk-adjusted performances through both periods.

Leave a comment!

That around half of the veteran managers in this sector have outperformed on a risk-adjusted basis through the past decade is not overly surprising. That only four have done so since 2011 indicates the difficulty of keeping pace with the indiscriminate rally of the past three years.

The start of the period brought a savage selloff amid fears of a Eurozone breakup: the MSCI Europe Small Cap index crashed by 19.8% in 2011, compared with a milder decline of 8.7% from the MSCI World Small Cap index. In that year, only one manager – Argos’s Best – posted a positive total return, of 0.8%.

But in each of the two subsequent years, the European small-cap index smashed the global one: by 29.5% to 18.1% in 2012, and by 40% to 32.9% last year. Europe lagged in the first half of this year, but only by 5.8% to 6.5%.

So staying ahead of that surge has proved a challenge to which only the minority have been equal. Andrew Brough(pictured), for example, has done so by overweighting the UK and industrials. Peter Fruzzetti has achieved it through an even greater allocation to the UK – half his portfolio, compared with Brough’s 28% – but half the index’s and Brough’s 20% weighting to financial services.

The last ex-UK fund, Baring Europe Select Trust, is positive over both timeframes – as well as being the absolute best for the decade, and third best over three years.

The analysis comes from Citywire Discovery, a new desktop system that allows fund buyers and fund groups to access track records of over 9,000 managers tracked by Citywire. It provides unique insights into peer group analysis, performance comparisons and competitor analysis. For more details contact support@citywireinsight.com

Leave a comment!

Nicholas Williams, Barings

Citywire A-rated Nicholas Williams runs one of the largest funds – the £1.2 billion Baring Europe Select Trust – in this subset of veterans. However, that equates to just a 2% market share despite not only Williams’s longevity but performance through the decade.

His information ratio is 0.37 for the 10-year period and 0.25 over three years, both comfortably ahead of the peer-group averages of 0.01 and minus 0.14 respectively.

Williams cannot be accused of playing it safe either. His largest country allocation is to France, at 16.9%, while many competitors have populated their portfolios with Scandinavian small-caps or more familiar British mid-caps (Baring Europe Select’s mandate excludes the UK).

Furthermore, his greatest sector weighting is to financials – and not just insurers. His third largest position is French asset manager Eurazeo, followed by the Spanish provider of trading systems Bolsas y Mercados Españoles.

Philip Dicken, Threadneedle

Over the full 10-year period Dicken is second only to Williams in risk-adjusted terms, with an information ratio of 0.33. However, on a three-year view Dicken has slipped into negative territory, albeit only on minus 0.01 – meaning he would still have beaten trackers after costs.

The relative weakness has been predominantly incurred over the past year, when his fund has gained just 10.6% to the index’s 23.9%.

At the country level Dicken is most overweight the UK, followed by France and Ireland, while being underweight Sweden, Switzerland and Italy. By sector he is backing healthcare and basic materials, but is allocating nothing to either telecoms or utilities. His top position is Danish jeweller Pandora.

Three-year total return: 46.1% (Average Manager Total Return: 37.3%)

Leave a comment!

Adrian Bignell, Invesco

Invesco’s A-rated Adrian Bignell has endured a tough decade, but has turned that around with a strong run since 2011.

Bignell’s 10-year information ratio is one of the sector’s worst, at minus 0.15 compared with an average of 0.01. On a three-year view, however, he ranks second in the peer group with 0.3 while his average rival has subtracted value.

His fund is nonetheless still relatively small at £185 million, even though it has been around since 1984 and is one of the few in the sector that will not overlap with UK equity portfolios.

Bignell’s top holding, representing 5.4% of the fund, is an unusual one: Leonteq, a Swiss specialist in structured investment products. Its share price has nonetheless more than trebled over the past year, and it is also a favoured pick of Jupiter’s A-rated Alexander Darwall.

Colin Stone, Fidelity

However, performance has been more subdued recently and the fund lags the index with a return of 12.1% to its 16.5% over the past three years.

So Fidelity recently refreshed its management, with Citywire A-rated Alberto Chiandetti to take the reins in October.

Paras Anand, head of European equities at Fidelity, explained that this would allow Stone to concentrate on his small-cap strategy.

This launched in 1995 and now contains £872 million, but it too has lagged its benchmark. Stone’s information ratio on the fund is negative for both 10 and three-year periods, at minus 0.1 and minus 0.24 respectively. For that to reverse, Stone will need his significant overweights to information technology and to the UK to pay off.

Three-year total return: 35% (Average Manager Total Return: 37.3%)

Leave a comment!

Not many managers have been able to add value over both 10 and three-year periods in the European small and mid-cap equity sector.

In fact, just three have: Citywire A-rated Nicholas Williams at Barings, + rated Peter Fruzzetti(pictured) at MFS, and A-rated Philip Best at Argos. The trio all have positive manager information ratios over both long and medium-term timeframes.

That makes them a distinct minority in the peer group of 24 funds with track records stretching back to 2004. Nine have generated negative risk-adjusted performances through both periods.

Leave a comment!

Not many managers have been able to add value over both 10 and three-year periods in the European small and mid-cap equity sector.

In fact, just three have: Citywire A-rated Nicholas Williams at Barings, + rated Peter Fruzzetti(pictured) at MFS, and A-rated Philip Best at Argos. The trio all have positive manager information ratios over both long and medium-term timeframes.

That makes them a distinct minority in the peer group of 24 funds with track records stretching back to 2004. Nine have generated negative risk-adjusted performances through both periods.

Leave a comment!

That around half of the veteran managers in this sector have outperformed on a risk-adjusted basis through the past decade is not overly surprising. That only four have done so since 2011 indicates the difficulty of keeping pace with the indiscriminate rally of the past three years.

The start of the period brought a savage selloff amid fears of a Eurozone breakup: the MSCI Europe Small Cap index crashed by 19.8% in 2011, compared with a milder decline of 8.7% from the MSCI World Small Cap index. In that year, only one manager – Argos’s Best – posted a positive total return, of 0.8%.

But in each of the two subsequent years, the European small-cap index smashed the global one: by 29.5% to 18.1% in 2012, and by 40% to 32.9% last year. Europe lagged in the first half of this year, but only by 5.8% to 6.5%.

So staying ahead of that surge has proved a challenge to which only the minority have been equal. Andrew Brough(pictured), for example, has done so by overweighting the UK and industrials. Peter Fruzzetti has achieved it through an even greater allocation to the UK – half his portfolio, compared with Brough’s 28% – but half the index’s and Brough’s 20% weighting to financial services.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

The last ex-UK fund, Baring Europe Select Trust, is positive over both timeframes – as well as being the absolute best for the decade, and third best over three years.

The analysis comes from Citywire Discovery, a new desktop system that allows fund buyers and fund groups to access track records of over 9,000 managers tracked by Citywire. It provides unique insights into peer group analysis, performance comparisons and competitor analysis. For more details contact support@citywireinsight.com

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Nicholas Williams, Barings

Citywire A-rated Nicholas Williams runs one of the largest funds – the £1.2 billion Baring Europe Select Trust – in this subset of veterans. However, that equates to just a 2% market share despite not only Williams’s longevity but performance through the decade.

His information ratio is 0.37 for the 10-year period and 0.25 over three years, both comfortably ahead of the peer-group averages of 0.01 and minus 0.14 respectively.

Williams cannot be accused of playing it safe either. His largest country allocation is to France, at 16.9%, while many competitors have populated their portfolios with Scandinavian small-caps or more familiar British mid-caps (Baring Europe Select’s mandate excludes the UK).

Furthermore, his greatest sector weighting is to financials – and not just insurers. His third largest position is French asset manager Eurazeo, followed by the Spanish provider of trading systems Bolsas y Mercados Españoles.

Three-year total return: 50% (Average Manager Total Return: 37.3%)

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Philip Dicken, Threadneedle

Over the full 10-year period Dicken is second only to Williams in risk-adjusted terms, with an information ratio of 0.33. However, on a three-year view Dicken has slipped into negative territory, albeit only on minus 0.01 – meaning he would still have beaten trackers after costs.

The relative weakness has been predominantly incurred over the past year, when his fund has gained just 10.6% to the index’s 23.9%.

At the country level Dicken is most overweight the UK, followed by France and Ireland, while being underweight Sweden, Switzerland and Italy. By sector he is backing healthcare and basic materials, but is allocating nothing to either telecoms or utilities. His top position is Danish jeweller Pandora.

Three-year total return: 46.1% (Average Manager Total Return: 37.3%)

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Adrian Bignell, Invesco

Invesco’s A-rated Adrian Bignell has endured a tough decade, but has turned that around with a strong run since 2011.

Bignell’s 10-year information ratio is one of the sector’s worst, at minus 0.15 compared with an average of 0.01. On a three-year view, however, he ranks second in the peer group with 0.3 while his average rival has subtracted value.

His fund is nonetheless still relatively small at £185 million, even though it has been around since 1984 and is one of the few in the sector that will not overlap with UK equity portfolios.

Bignell’s top holding, representing 5.4% of the fund, is an unusual one: Leonteq, a Swiss specialist in structured investment products. Its share price has nonetheless more than trebled over the past year, and it is also a favoured pick of Jupiter’s A-rated Alexander Darwall.

Three-year total return: 53.9% (Average Manager Total Return: 37.3%)

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Colin Stone, Fidelity

However, performance has been more subdued recently and the fund lags the index with a return of 12.1% to its 16.5% over the past three years.

So Fidelity recently refreshed its management, with Citywire A-rated Alberto Chiandetti to take the reins in October.

Paras Anand, head of European equities at Fidelity, explained that this would allow Stone to concentrate on his small-cap strategy.

This launched in 1995 and now contains £872 million, but it too has lagged its benchmark. Stone’s information ratio on the fund is negative for both 10 and three-year periods, at minus 0.1 and minus 0.24 respectively. For that to reverse, Stone will need his significant overweights to information technology and to the UK to pay off.

Three-year total return: 35% (Average Manager Total Return: 37.3%)

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

We use cookies to give you the best experience on our website. You can continue to use the website and we'll assume that you are happy to receive cookies. If you would like to, you can find out more about cookies and managing them at any time here. This site is for Professional Investors only, please read our Risk Disclosure Notice for Citywire’s general investment warnings

We use cookies to improve your experience. By your continued use of this site you accept such use. To change your settings please see our policy.